REGIONAL FOCUS SAN FRANCISCO: The Bay rolls on - There is lifeafter the crash. Aimee Grove reports on the upside to the downturn

As ground zero for the so-called 'New Economy' and headquarters of

the once-raging dot-com party, San Francisco's status as a PR center

rose to epic proportions. Salaries surged, retainers went through the

roof and the world's largest agencies moved to town to ride the start-up

wave.



Through the early fall of last year, Bay Area PR firms eagerly scooped

up staff to service new start-up business and existing clients with

flush budgets. Thus, despite the severe drop-off looming just around the

corner, last year's final tally included more than a few big winners

among multinationals and tech specialists.



One of the major global players, Hill & Knowlton, made a huge splash in

San Francisco last year, increasing billings there by nearly 49% to

dollars 24.9 million. Most of the growth - all organic in 2000 - came

from new business at Blanc & Otus, the San Francisco-based tech agency

H&K acquired in 1999, and work done for existing clients E-Trade, Compaq

and Blue Shield.



Fleishman-Hillard and Ruder Finn also boasted banner years in 2000.

Fleishman's San Francisco office upped its income by nearly 30% -

largely due to the Yahoo! win last spring, while RF's billings shot up

by 152%, mostly from a mix of deep tech and consumer clients like

Women.com.



Weber also made waves with a whopping 226% increase, though that number

reflects its merger with Shandwick (which had sizeable operations in

Silicon Valley) and the addition of fee income from Red Whistle, Weber's

San Francisco-based consumer-tech offshoot. Even Burson-Marsteller,

which has recently suffered setbacks stemming from the loss of Sun

Microsystems, last year posted a gain of 29%, with billings of dollars

21.3 million.



Most of the record-shattering triple-digit growth came from city's tech

specialists - both established players and relative newcomers. For

example, billings for the three-year-old San Francisco office of

London-based Text 100 shot up nearly 129% to dollars 4.3 million,

spurred by big wins from Excite@Home, Ask Jeeves and a host of other

lesser-known players.



And FitzGerald Communications, a Boston-based tech firm that set up shop

here in 1998, piled on new business right and left, boosting revenues by

124% over 1999. Another big winner was Connors Communications, whose San

Francisco outpost climbed 109% to just under dollars 2.5 million with

clients like Sidestep, Nordstrom.com and Asera.



Picking up the pieces



Now that the bottom has dropped out of the tech market and dot-com has

become a dirty word, Bay-area PR stands to lose all it gained. Suddenly,

the land of opportunity and VC-fueled PR riches has become an arid

landscape littered with layoffs and dead dot-coms. The labor shortage of

six months ago has shifted to a surplus of PR talent seeking employment

now that companies from Cisco to Hewlett-Packard, and agencies from

Ogilvy to GCI have handed out pink slips.



Although unemployment is up, the new business pipeline is beginning to

fill again in the second quarter as corporate teams look to shift

accounts to new agencies. Sun Microsystems, SGI, Sony Computer

Entertainment and Inktomi are a few of the companies realigning agency

relationships this year.



'We have submitted more proposals this month than in the entire first

quarter, which is a good sign,' says Tim Johnson, managing director of

Golin/Harris SF. 'At least companies are willing to talk to agencies

again.'



But a lot of these prospects are taking longer to make decisions, with

searches stretching on as long as four or five months in some cases.

Also, most companies are working with tighter budgets that fall far

below the dollars 30,000-dollars 40,000 per month retainers most

agencies demanded six months ago.



'It takes three new clients to replace one client from last year because

the budgets are so reduced,' admits FitzGerald VP Fred Bateman.



The silver lining



Agencies are looking to mine other industries and offer new services to

make up for lost revenue. Biotech and medical tech are increasingly

mentioned as untapped growth areas. Generalists such as Ogilvy, BSMG and

Fleishman are all pursuing biotech opportunities. Emerging tech

specialists like FitzGerald have created new teams to serve these types

of clients.



Hard times have created opportunities for agencies offering general

corporate, crisis and/or employee communications. For example, Singer

Associates, a public affairs boutique started by former GCI Kamer-Singer

partner Sam Singer, has picked up five new clients and is actually

hiring for account positions right now.



California's escalating energy crisis has created issues management work

for agencies such as Fleishman, Ketchum and GCI, who have all picked up

business from players in the debacle.



Other agencies are mining for gold in the consumer lifestyle/retail

sector.



For example, Magnet Communications, formed last year by the merger of

Creamer Dickson Basford, Kratz & Jensen and Capstone Communications, has

picked up nearly 10 new clients since January, many from the Napa/Sonoma

wine business. Access Communications, best known for work with tech

clients like Siebel Systems and Sega, recently added the retail clothing

chain Limited Too to its roster.



Agencies are also broadening geographically. Ketchum is opening an

office across the Bay in Oakland to target business along the burgeoning

East Bay corridor. And FitzGerald/SF leader John Berard says he's

seeking income opportunities outside California in tech centers such as

Seattle and Portland, OR.



Now that most firms have more time than work, many are putting energy

and resources into training and new client service initiatives. Weber

Shandwick has started a new program called 'Tech 911,' which teaches

troubled tech companies how to address tough issues like handling

less-than-stellar earnings releases. Switzer Communications, a mid-size

tech independent with clients such as Handspring and RCA eBooks, now

offers clients non-PR activities such as competitive research, naming,

marketing plans and partner promotions. Golin/Harris' basic media

training has broadened to include specialized teleprompter coaching. And

every San Francisco employee at Fleishman was recently given a refresher

course on presentation training.



Agencies are also spending more time and money marketing themselves.



Porter Novelli is hosting an interactive open house for its new San

Francisco office and a symposium on the agency's trademark review

process. And Weber Shandwick has ramped up the number of speaking

engagements for top execs 'to build visibility,' says SVP Marc Bien.



A look ahead



Not every agency will survive the slowdown, especially those left

holding the bag for start-ups that skipped out on their final tabs.

However, many will survive, and maybe even thrive, in the tougher times

ahead.



Agencies with international capacities stand to gain from the

downturn.



Ogilvy global tech practice leader Larry Sennett points out, 'As the US

economy slows, there will be and has been an increasing focus on global

programs for clients looking for new revenue markets outside the

US.'



Diversity - in services and industry expertise - will serve the

established generalist firms well in the new marketplace. This may be

why many of the sister agencies, who until recently maintained clear,

separate identities and office spaces, are now shacking up with each

other, adopting one name and integrating practice areas. For example,

Porter Novelli and PN Convergence Group (formerly Copithorne & Bellows)

are now housed together and known as Porter Novelli. Similarly, Ogilvy

and Alexander Ogilvy are now under one roof with the name Ogilvy Public

Relations.



Tech firms with proven capabilities in nuts-and-bolts product PR are

bound to emerge unscathed. 'Last year was the year of buzz and

branding,' says Karen Klein, GM of BSMG/Benjamin Group. 'Now the

emphasis is more on back-to-basics, traditional product-oriented PR

reaching out to the publications that influence the influencers and the

customers themselves, not just the business press.'



No matter what agencies do differently over the next seven months, 2001

numbers promise to tell a whole new story. Furthermore, not everyone

thinks the city's reversal of fortune is the end of the world.



'Profits mask lots of ills at any company, and ultimately this kind of

market forces you to tighten up,' says Dave Samson, Ketchum GM. 'In

tough times, people come away with a better understanding of the

business of the PR industry. That's a good thing.'



SAN FRANCISCO PR AGENCIES

Ranking Firm Name Revenue (dollars) Increase Staff

00 99 2000 (%)

1 3 Hill & Knowlton 24,896,000 49 188

2 1 Fleishman-Hillard 24,383,000 27 164

3 4 Burson-Marsteller 21,320,000 29 87

4 2 Porter Novelli International 19,624,000 3 158

5 5 Ketchum 18,477,000 18 117

6 6 GCI Group/APCO Associates 13,331,410 10 90

7 7 Access Communications 11,050,000 22 64

8 9 Ogilvy Public Relations Worldwide 10,179,400 37 85

9 11 Applied Communications 9,656,000 53 72

10 13 Publicis Dialog 7,083,025 25 40

11 16 Horn Group 7,077,158 58 49

12 14 Phase Two Strategies 6,805,551 37 37

13 12 BSMG Worldwide 6,746,115 12 48

14 22 Weber Shandwick Worldwide 6,507,025 226 64

15 19 FitzGerald Communications 6,401,201 124 35

16 10 Edelman Public Relations Worldwide 6,267,210 -6 40

17 17 Schwartz Communications 6,201,369 41 48

18 8 Golin/Harris 4,818,000 -38 32

19 18 Manning Selvage & Lee 4,763,913 29 5

20 24 Ruder Finn 4,609,000 152 33

21 23 Text 100 4,285,182 129 41

22 15 Morgen Walke 3,479,677 -23 24

23 21 Antenna Group 3,007,653 26 24

24 26 Lippert/Heilshorn & Associates 2,914,592 67 10

25 27 Fineman Associates Public Relations 2,611,743 115 14

26 25 Switzer Communications 2,540,000 45 21

27 20 Solem & Associates 2,464,078 0 17

28 28 Connors Communications 2,447,239 109 16

29 31 PR21 1,983,368 206 16

30 29 Noonan/Russo Communications 1,830,000 85 12

31 NEW Middleberg Euro RSCG 1,563,571 N/A 20

32 30 Stephenson Group 1,493,610 117 14

33 NEW Cohn & Wolfe 1,355,000 N/A 14

34 32 Sterling Communications 1,300,000 160 14

35 34 Bender/Helper Impact 839,128 241 5

36 NEW Sterling Hager 820,133 N/A 13

37 33 Dorland Sweeney Jones Health Comms 412,000 36 4

38 NEW Magnet Communications 210,000 N/A 4

39 NEW Plesser Associates 150,000 N/A 2

SOURCE: Council of PR Firms Auditing: No audit was required for

inclusion in the rankings. The CEO/CFO/principal was required to sign a

statement verifying the accuracy of the data and agreeing to possible

participation in a random audit Disclaimer: while every effort has been

made to ensure the accuracy of these figures, PRWeek cannot accept

liability for, nor make financial guarantees based upon the information

in this chart.



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